Criminal Defense Lawyers

Obscuring Ownership to Conceal Sanctioned Parties

Hey there! Obscuring ownership of assets and companies is a tricky issue that a lot of folks may not think much about. But it can be used to hide money and get around laws, so it’s good to understand the basics.

Some people try to conceal who really owns or controls something – like a company, property, or bank account – to avoid getting caught breaking laws and sanctions. It’s kind of like money laundering, just more complicated and harder to detect. Let’s break it down.

What is beneficial ownership?

Beneficial ownership refers to the actual person who ultimately owns, controls, or benefits from something – even if their name isn’t directly on the paperwork. It’s about looking past the surface to see who’s really pulling the strings.

For example, someone could put their company in their spouse’s name on paper but still control it behind the scenes. Or a corrupt politician could have an anonymous offshore shell company that holds their stolen money. The politician is the true beneficial owner.

Why do people obscure ownership?

There are a few main reasons why individuals and organizations conceal beneficial ownership:

• To avoid taxes
• To launder money from illegal activities
• To get around international sanctions by hiding assets and dealings with sanctioned parties
• To finance terrorism or other crimes in the shadows
• To obscure conflicts of interest and corruption

By masking who ultimately owns or controls assets and entities, criminals and corrupt officials can try to avoid getting caught by authorities. It also makes it harder to “follow the money” during investigations.

How do they obscure ownership?

There are lots of ways beneficial ownership can be disguised, but some of the most common techniques include:

• Using shell companies – companies that exist only on paper and have no real operations or assets. They simply serve as a front to hold property and funds.
• Setting up trusts and putting assets in the name of the trust instead of an individual.
• Using fake names, aliases, and nominee directors/shareholders to hide the real owner.
• Creating complex ownership structures across multiple countries to obscure who controls what.
• Using intermediaries like accountants, lawyers, and brokers to handle transactions and paperwork to further separate beneficial owners from assets.
• Holding ownership through bearer shares, which are company shares that belong to whoever physically holds the share certificate document.
• Conducting transactions in cash and cryptocurrency to avoid paper trails.

By layering these techniques, real ownership can become very hard to untangle. Criminals use ever more complex schemes to stay hidden.

Examples of obscured ownership schemes

Some real-world examples help show how tricky these ownership schemes can get:

• Russian oligarchs often use shell companies in places like Cyprus and the Caribbean to obscure their ownership of assets like yachts, real estate, and investments.
• The Sinaloa drug cartel allegedly used Chinese firms as fronts to launder billions in drug money. The Chinese companies exported goods to Mexico, where cartel members used shell and phantom firms to buy the goods at inflated prices in order to transfer funds.
• Former Ukrainian president Viktor Yanukovych allegedly siphoned billions in public funds out of Ukraine through a huge network of anonymous companies across many jurisdictions.

These complex schemes make it extremely difficult for authorities to connect the dots and identify who truly owns what.

Impacts of obscured ownership

Lack of beneficial ownership transparency enables shady activity that hurts society in many ways:

• Allows sanctioned parties and oligarchs to continue doing business by hiding assets.
• Enables money laundering and financing of terrorism, organized crime, and weapons proliferation.
• Deprives developing countries of tax revenues by obscuring funds in tax havens.
• Facilitates public corruption by disguising bribes and stolen funds.
• Distorts markets and competition when company ownership is unclear.
• Puts the financial system at risk when banks can’t identify clients’ true owners.

Basically, the secrecy makes it easier for bad actors to operate and harder for law enforcement to stop them. This destabilizes economies and communities.

Recent scandals

Several major leaks and scandals have revealed how obscured ownership networks enable shady activity:

• Panama Papers: Massive leak of files from a Panama-based law firm that exposed how wealthy people use shell companies in tax havens. Implicated public officials in corruption and tax avoidance schemes. [1]
• Paradise Papers: Another huge leak showing offshore tax avoidance and money laundering by multinational companies and high-profile individuals. [2]
• Luanda Leaks: Files linking the daughter of a former African leader to suspect payments through an intricate web of shell companies. [3]
• FinCEN Files: Bank reports highlighting suspicious transactions through opaque shell companies moving trillions of dollars. [4]
• Pandora Papers: Leak uncovering financial secrets of politicians, billionaires and celebrities. Showed use of offshore accounts to shield assets. [5]
• Suisse Secrets: Leak of data on over 18,000 Swiss bank accounts showing widespread misconduct. [6]

These bombshell leaks gave the public a glimpse into the normally hidden world of anonymous companies and offshore finance. They exposed how the wealthy and powerful conceal their dealings. The revelations led to public outrage and calls for reform.

Obscured ownership networks continue enabling questionable activity around the world. But thanks to whistleblowers and journalists, more secret schemes are coming to light. Public scrutiny and pressure for transparency is growing.